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Consumers’ knowledge of their health insurance

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Some health policy recommendations are based on assumptions about consumer awareness of the health system. Advocates of a greater reliance on market competition in the allocation of health care resources assume that consumers are (or can be) well-informed so that market processes work well. Proponents of regulation, on the other hand, believe that consumers cannot acquire enough knowledge to make optimal decisions.

Given its importance, surprisingly few measurements of consumer awareness have been made. show that most consumers have a basic understanding of the health care delivery system, but many lack knowledge of certain facts that are relevant to health care use decisions. In this article, we explore another aspect of consumers’ knowledge of the health care system: their knowledge of their health insurance.

Health insurance affects the dollar price families pay for care; If consumers do not understand the benefits of their insurance, their decisions to use health care may be based on incorrect estimates of the prices they will pay. Also, if families don’t understand their current policies, they can buy more or less than optimal insurance.

Little is known about consumers’ knowledge of their insurance policies. Studies of factors that influence consumers’ choice between prepaid group practice and other insurance programs have shown that the reasons given for choosing accurately reflect the differences between the programs. On the other hand, some studies have highlighted gaps in consumers’ knowledge about the coverage they have. But all of this research leaves many unanswered questions about how much consumers know about its benefits.

Our objective in this article is twofold. We study the precision with which families can describe the extent to which they benefit from a variety of health services, and we investigate the reasons for differences in that knowledge among families.

Most health insurance contracts reimburse families for a portion of their medical expenses. These reimbursement insurance contracts often include deductibles (fixed amounts a family must spend before the insurance policy pays any benefits), coinsurance (a percentage of the bill that the family pays), internal limits (such as restrictions on the number of visits). or allowed days of inpatient stay), or payment schedule limits (such as rate limits for a doctor visit). An alternative to reimbursement insurance is prepaid health care. Families in the prepaid health group pay a fixed, recurring premium upfront and receive certain health care services from group doctors. We study and compare the knowledge of benefits between families with reimbursement insurance and those of the prepaid group.

Additionally, we investigated the factors that influence consumers’ knowledge of their health insurance to see if there are ways to improve their knowledge. In particular, we are interested in whether simplified benefit structures and consumer education will lead to increased consumer awareness.

We found that there are gaps in current knowledge, especially about outpatient coverage. Knowledge is greatest when the benefits are simple. Prepaid group practice plans and reimbursement policies with just a few options are more accurately understood than complex policies. We also found evidence that consumer education can be effective.

The article is divided into six sections. The second section (Methods) describes the consumer sample, data collection documents, and basic analytical methods. In sections three, four, and five, we answer three consumer awareness questions: Do families know if they have health insurance? Do families know what services their insurance covers? Do families know what benefits the plan will pay for covered services? The last section summarizes the findings and conclusions.


The sample for this study includes 3,218 families from six sites. These are:

1) Dayton, Ohio, Standard Metropolitan Statistical Area

2) the urbanized portion of the Seattle, Washington Standard Metropolitan Statistical Area

3) Fitchburg-Leominster, Massachusetts, Standard Metropolitan Statistical Area

4) Charleston, South Carolina Standard Urban Statistical area

5) most of Franklin County, Massachusetts

6) Most of Georgetown County, South Carolina.

A subset of the sample in each institution are families that participated in the pilot phase of the Health Insurance Survey (HIS), a social experiment in health financing. Study participants were randomly assigned to one of 14 experimental health insurance plans, which varied in the amount they reimbursed families for medical expenses. In addition, a subset of the Seattle, WA sample enrolled in the Group Health Cooperative of Puget Sound, a well-established prepaid group practice.

Another subset of the sample at each site is a comparable group of households that did not participate in the pilot plans but had their own health insurance. We call this part of the sample control families. Several of the control families in Seattle, Washington were enrolled in the Group Medical Cooperative.

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